Demand-pull inflation
What is "demand-pull" inflation?
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This is a common form of inflation in which demand outstrips supply to cause a rise in price and therefore inflation. In the AD AS approach in macroeconomics, it is shown as a continuous rise in AD with a constant AS. This rise can be due to a rise in any of the components of AD- consumption spending, investment spending, and government spending or net exports. If the economy is not on full employment level then the rise in price is accompanied by a rise in GDP as well. However if the economy is already at full employment then there is no rise in GDP, only price rises. This kind of demand pull inflation is less acceptable and more damaging to the economic agents.
WHAT IS THE CHANGE IN EQUILIBRIUM gdp CAUSED BY THE ADDITION OF NET EXPORTS?
Distinguish between full-employment equilibrium and Under-employment equilibrium. Whenever equality among AD and AS is at full employment level it is termed as full employment equilibrium. Although whenever equali
Does a surplus of AD over AS always entail a condition of inflationary gap? Answer: No. Inflationary gap takes place only if AD > AS equivalent to full employmen
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